May 18: Nepal Rastra Bank (NRB) has announced to forbid banks and financial institutions (BFIs) from publishing notices for auctioning collateral or recovering loans during the prohibitory period. This new provision will remain in force until one month after the prohibitory orders are lifted by the government authorities.

Releasing the third quarterly review report of the monetary policy of the current fiscal year (FY 2020/21), the central bank said that it will make necessary arrangements to bar BFIs from publishing public notices to auction collaterals to recover their loans from borrowers during and after one month of the prohibitory period.
 The restriction to recover loans through auction will come into force after the central bank issues a circular to the BFIs to implement the provision, according to NRB officials who say that the circular will be issued 'soon'.  

The provision aims at providing protection to borrowers from BFIs auctioning their collateral to recover loans until one month after the prohibitory period ends.

“The provision is intended to stop banks and financial institutions from moving ahead with the process of auction to recover loans from defaulters during this crisis. There won’t be much participation in the bank auction during the prohibitory period, either. Halting the recovery of loans through auction will also provide a relief to the borrowers who are hit hard by the Covid-19 pandemic,” Dev Kumar Dhakal, spokesperson of NRB, told New Business Age. 

Similarly, the NRB, in its third quarterly monetary policy review report, said that it will also introduce a provision to prohibit BFIs from imposing any penalty or other additional charges in loan repayment from borrowers during the prohibition period.